Determining Cost Relationships Midstate Containers Inc. manufactures cans for the canned food industry. The operations manager...

Determining Cost Relationships

Midstate Containers Inc. manufactures cans for the canned food industry. The operations manager of a can manufacturing operation wants to conduct a cost study investigating the relationship of tin content in the material (can stock) to the energy cost for enameling the cans. The enameling was necessary to prepare the cans for labeling. A higher percentage of tin content in the stock increases the cost of material. The operations manager believed that a higher tin content in the can stock would reduce the amount of energy used in enameling. During the analysis period, the amount of tin content in the stell can stock was increased for every month, from April to September. The following operating reports were available from the controller:

	April	May	June	July	August	September
Materials	$14,000	$34,800	$33,000	$21,700	$28,800	$33,000
Energy	13,000	28,800	24,200	14,000	17,100	16,000
Total Cost	$27,000	$63,600	$57,200	$35,700	$45,900	$49,000
Units Produced	÷ 50,000	÷ 120,000	÷ 110,000	÷ 70,000	÷ 90,000	÷ 100,000
Cost Per Unit	$0.54	$0.53	$0.52	$0.51	$0.51	$0.49

Differences in materials unit costs were entirely related to the amount of tin content. In addition, inventory changes are negligible and are ignored in the analysis.

A) Calculate the Total cost per unit for each month. Round your answers to the nearest cent

	Total Cost Per Unit
April	?
May	?
June	?
July	?
August	?
September	?

B) Interpret your results

The calculations reveal that the tin content and energy costs are _________ related. That is, as the materials cost increased due to higher tin content, the energy costs ________ by more. Thus, the recommendation should be to __________ raw can stock with the tin content at the $0.33-per-unit level (September level). This is the material that __________ the total production cost for this set of data. Additional data could be used to determine the optimal tin content or the point where energy cost savings fail to overcome additional material costs.

Solutions

Expert Solution

ekkarill92 answered 3 weeks ago

Next > < Previous

Related Solutions

Chataqua Can Company manufactures metal cans used in the food-processing industry. A case of cans sells...

Chataqua Can Company manufactures metal cans used in the food-processing industry. A case of cans sells for $30. The variable costs of production for one case of cans are as follows: Direct material $ 7.00 Direct labor 2.00 Variable manufacturing overhead 6.50 Total variable manufacturing cost per case $ 15.50 Variable selling and administrative costs amount to $0.90 per case. Budgeted fixed manufacturing overhead is $588,000 per year, and fixed selling and administrative cost is $42,500 per year. The following...

Chenango Can Company manufactures metal cans used in the food-processing industry. A case of cans sells...

Chenango Can Company manufactures metal cans used in the food-processing industry. A case of cans sells for $30. The variable costs of production for one case of cans are as follows: Direct material $ 6.00 Direct labor 2.00 Variable manufacturing overhead 7.00 Total variable manufacturing cost per case $ 15.00 Variable selling and administrative costs amount to $.80 per case. Budgeted fixed manufacturing overhead is $623,000 per year, and fixed selling and administrative cost is $45,000 per year. The following...

What are the fluctuations of canned and frozen vegetables in the food industry?

A company in the food industry stores a large number of canned goods in a central...

A company in the food industry stores a large number of canned goods in a central warehouse. Last year, 3% of the canned goods had damage (for example, ugly worms or dents in the can), and the warehouse manager suspects it could be even worse this year. To investigate this, we randomly selected 260 of the preserves and of these, 13 have damage. (a) Conduct hypothesis testing to test if the warehouse manager's suspicions can be considered where Acknowledged. (b)...

A company in the food industry stores a large number of canned goods in a central...

The manager in a canned food processing plant is trying to decide between two labeling machines....

The manager in a canned food processing plant is trying to decide between two labeling machines. Machine A Machine B First Cost $15,000 $25,000 Maintenance and operating costs 1,600 400 Annual benefit 8,000 13,000 Salvage value 3,000 6,000 Useful life, in years 6 10 a) Assume an interest rate of 6%. slove using annual worth to determine which machine should be chosen. b) Solve using Internal Rate of Return

The manager of a canned-food processing plant has two mutually exclusive labeling machine options. On the...

The manager of a canned-food processing plant has two mutually exclusive labeling machine options. On the basis of a rate of return analysis with a MARR of 9% per year, determine which model is economically better Model X Y First cost, $ -50,000 -90,000 AOC, $ per year -6,000 -4,000 Salvage value, $ 10,000 15,000 Life, years 5 10

Wellsley Containers currently uses a recycled plastic to make bottles for the food industry. Current bottle...

Wellsley Containers currently uses a recycled plastic to make bottles for the food industry. Current bottle production? information: The cost and time standards per batch of 10,000 bottles are as ?follows: Plastic 360 kilograms at $11.00 per kg Direct labor 6.0 hours at $20.00 per hour The variable manufacturing overhead rate is based on total estimated variable manufacturing overhead of $500,000 and estiamted total DLH of 10,000. Wellsley allocates its variable manufacturing overhead based on direct labor hours (DLH). Proposed...

FreshPak Corporation manufactures two types of cardboard boxes used in shipping canned food, fruit, and vegetables....

FreshPak Corporation manufactures two types of cardboard boxes used in shipping canned food, fruit, and vegetables. The canned food box (type C) and the perishable food box (type P) have the following material and labor requirements. Type of Box C P Direct material required per 100 boxes: Paperboard ($0.34 per pound) 50 pounds 90 pounds Corrugating medium ($0.17 per pound) 40 pounds 50 pounds Direct labor required per 100 boxes ($14.00 per hour) 0.35 hour 0.70 hour The following production-overhead...

Costs of Different Customer Classes Kaune Food Products Company manufactures canned mixed nuts with an average...

Costs of Different Customer Classes Kaune Food Products Company manufactures canned mixed nuts with an average manufacturing cost of $49 per case (a case contains 24 cans of nuts). Kaune sold 155,000 cases last year to the following three classes of customer: Customer Price per Case Cases Sold Supermarkets $66 80,000 Small grocers 96 45,000 Convenience stores 88 30,000 The supermarkets require special labeling on each can costing $0.03 per can. They order through electronic data interchange (EDI), which costs...

Subjects